FX.co ★ New Zealand Holds Cash Rate Steady

The Reserve Bank of New Zealand opted to maintain its Official Cash Rate (OCR) at 3.25% during its policy meeting in July 2025. This decision aligns with market expectations and upholds the lowest rate recorded since August 2022. The Monetary Policy Committee highlighted increased uncertainty and imminent inflation risks as reasons for deferring further adjustments until August. The annual inflation rate stood at 2.5% in the first quarter of 2025, comfortably within the Committee's target range of 1% to 3%. Projections suggest that inflation might approach the upper threshold of this range during the second and third quarters. Nevertheless, the easing of core inflation and existing spare capacity in the economy should facilitate a gradual return to the 2% midpoint. Simultaneously, New Zealand's economy experienced a contraction of 0.7% on a year-on-year basis in the first quarter of 2025, performing slightly better than the anticipated 0.8% decline and marking an improvement from the 1.3% contraction observed in the last quarter of 2024. Despite this slight recovery, the Monetary Policy Committee remains concerned about the recovery's pace, cautioning that ongoing uncertainty may lead to more restrained behavior from both households and businesses.